Corvallis taxpayers may be asked to contribute $4.2 million of the $23 million cost of a waterfront hotel and parking structure. Taxpayers should give this proposal their undivided suspicion.
Although details of the proposed deal are sketchy, those that have come to light do not suggest that Corvallis would be getting a good deal. If Tom Jensen’s thoughtful letter to the editor has its numbers right, for $4.2 million Corvallis could build its own downtown parking garage that would accommodate 400 cars day and night. Under the proposed deal with the hotel developers around 100 parking spots in their garage would be available to the public in the daytime, and perhaps 60 spots at night. Anyone who has tried to park downtown in the evening knows that 60 spaces would be a drop in the bucket, especially if the same money could have produced 400 spaces.
The proposed bonds to finance this garage would be paid off at the rate of $325,000 per year, while the hotel would only be paying $70,000 a year for getting to use as many of the parking spots as needed for its guests. So where would the additional $255,000 a year come from? Supposedly, it would come from room tax collections and property taxes paid by the hotel. But if the hotel is built, those taxes will be collected by the city even if it has not financed the garage, and these revenues would be available for other city purposes if it doesn’t have to pay off bonds with it. So it is not reasonable to say that the proposed deal would be self-financing.
Of course the developers have threatened that the hotel would not “pencil out” if the city doesn’t kick in the $4.2 million. In other words, it would not be built and the city would not be collecting any room or property taxes from it. This is an interesting bargaining argument, but the city need not and should not buy it. As a general principle, projects like this that cannot attract enough private capital to be built without public “participation” probably are not economically viable and should not be built. I strongly recommend that the city call the developers’ bluff here, and see what happens.
One cannot blame the developers for proposing this deal, since it allows them to keep all of the profits from operating the hotel while shifting a great deal of the risks of loss to Corvallis taxpayers. And while we should hesitate to impugn the motives of our officials, the proposed deal does smell rather like crony capitalism at its worst.
Since the whole proposal has only recently come to light, at the very least the Corvallis City Council should postpone a decision until more public scrutiny and discussion can take place. If I were on the Council, though, my inclination would be to shoot the idea down at the earliest opportunity.